Value creation around merger waves: the role of managerial compensation

David Hillier, Patrick McColgan, Athanasios Tsekeris*

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This paper examines the relation between executive compensation and value creation in merger waves. The sensitivity of CEO wealth to firm risk increases the likelihood of out‐of‐wave merger transactions but has no influence on in‐wave merger frequency. CEOs with compensation linked to firm risk have better out‐of‐wave merger performance in comparison to in‐wave mergers. We also present evidence that cross‐sectional acquirer return dispersion is greater for in‐wave acquisitions. Our results suggest that the underperformance of acquiring firms during merger waves can be attributed in part to ineffective compensation incentives, and appropriate managerial incentives can create value, particularly in non‐wave periods.
Original languageEnglish
Pages (from-to)132-162
Number of pages31
JournalJournal of Business Finance and Accounting
Volume47
Issue number1-2
Early online date11 Jan 2020
DOIs
Publication statusPublished - 8 Feb 2020

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Value creation
Mergers
Managerial compensation
Merger waves
Firm risk
Chief executive officer
Managerial incentives
Wealth
Underperformance
Return dispersion
Executive compensation
Incentive compensation

Keywords

  • deal performance
  • delta
  • vega
  • incentive compensation
  • merger waves
  • G31
  • G34
  • M12

Cite this

Hillier, D., McColgan, P., & Tsekeris, A. (2020). Value creation around merger waves: the role of managerial compensation. Journal of Business Finance and Accounting, 47(1-2), 132-162. https://doi.org/10.1111/jbfa.12419
Hillier, David ; McColgan, Patrick ; Tsekeris, Athanasios. / Value creation around merger waves: the role of managerial compensation. In: Journal of Business Finance and Accounting. 2020 ; Vol. 47, No. 1-2. pp. 132-162.
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Hillier, D, McColgan, P & Tsekeris, A 2020, 'Value creation around merger waves: the role of managerial compensation', Journal of Business Finance and Accounting, vol. 47, no. 1-2, pp. 132-162. https://doi.org/10.1111/jbfa.12419

Value creation around merger waves: the role of managerial compensation. / Hillier, David; McColgan, Patrick; Tsekeris, Athanasios.

In: Journal of Business Finance and Accounting, Vol. 47, No. 1-2, 08.02.2020, p. 132-162.

Research output: Contribution to journalArticle

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Hillier D, McColgan P, Tsekeris A. Value creation around merger waves: the role of managerial compensation. Journal of Business Finance and Accounting. 2020 Feb 8;47(1-2):132-162. https://doi.org/10.1111/jbfa.12419